Ontario Insurance Commission
Commission des assurances de l’Ontario
Neutral Citation: 1996 ONICDRG 190 Appeal: P-001736
OFFICE OF THE DIRECTOR OF ARBITRATIONS
FRANÇOIS PHILIPPE Appellant
and
ROYAL INSURANCE COMPANY OF CANADA Respondent
Before: Elisabeth Sachs
Counsel: François Philippe (in person) Kevin J. Kovalchuk (for Royal Insurance)
APPEAL ORDER
Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
The appeal is dismissed and the arbitration order dated January 24, 1994 is confirmed.
Mr. Philippe is not entitled to his appeal expenses.
November 6, 1996
Elisabeth Sachs Director of Arbitrations
Date
REASONS FOR DECISION
I. BACKGROUND
François Philippe was injured in a motor vehicle accident on December 14, 1990. He received weekly income benefits of $502.34 from Royal Insurance Company of Canada (“Royal”) under O. Reg. 672, Statutory Accidents Benefits Schedule - Accidents Before January 1, 1994 (the Schedule).
Although there was no question that Mr. Philippe was entitled to continue receiving weekly income benefits as a result of the injuries he sustained, he and Royal disagreed about the amount. Mr. Philippe claimed a higher benefit of $572.50 based on his interpretation of “ceasing expenses” under paragraph 12(3)7 of the Schedule. A three-day arbitration hearing took place, at which Mr. and Mrs. Philippe, his accountant, an adjuster and Royal’s claims manager testified. Twenty-seven exhibits were filed.
The arbitrator characterized the issue as follows:
The scheme is meant to ensure that an applicant is not stuck with continued business expenses, without allowance being made for them in his or her benefits. However, expenses that stop after the accident because the applicant is no longer at work are deducted from his or her income.
The parties disagree about the ceasing expenses that should be deducted in calculating Mr. Philippe's income from self-employment before the accident. The core of the dispute is whether a reduction in an expense after the accident represents a ceasing expense under section 12(7)3.....
[The parties] disagree about certain expenses, which continued to some extent after the accident, but at a reduced level.
(Decision, pg. 5, emphasis in original)
The arbitrator determined Mr. Philippe’s income from self-employment only in the four weeks before the accident was $156.64 per week, including the deduction for ceasing expenses as required by paragraph 12(7)3 of the Schedule. This amount, when added to his other income, confirmed the total weekly income benefit Royal was paying. Mr. Philippe appeals this finding.
II. ISSUES AND ANALYSIS
A. New Evidence on Appeal
Mr. Philippe submitted three documents for consideration in his appeal, stating they were not available at the arbitral hearing.
The documents are customer copies of invoices for the purchase of a cellular telephone, battery, and one-year telephone subscriber agreement, dated February 18 and 22, 1994. They reflect arrangements made by Mr. Philippe after he received the arbitrator’s decision released just over a month earlier. In his Notice of Appeal, Mr. Philippe states the cellular telephone was bought “for reason of possible return to part-time work in a near future in my line of work (snowplowing, drywall, insulation).”
There is a broad discretion to admit new evidence on appeal. At page 4 of my decision in Shelley L.P. and Royal, (June 23, 1995, OIC P-002235), the parameters of the discretion are set out as follows:
The admission of new evidence in an appeal is discretionary. As stated in the Bruno case, referring to the tests applied in criminal and civil appeal cases, at page 3:
“The principles developed in the case law are relevant as a touchstone and the Director should have regard to them, subject always to the overriding concepts of natural justice, fairness to the parties, and relevance.”
I also concluded the initial criteria to be applied are:
“1. The evidence should generally not be admitted if by due diligence it could have been adduced at trial;
The evidence must be reasonably capable of belief;
The evidence must relate to a potentially decisive issue and if believed, taken with the other evidence adduced at trial, be expected to have affected the result.”
It is important to note these are but guidelines, and each case must be looked at in its own context, including the nature of all the evidence before the arbitrator and any findings relative to the weight and credibility of that evidence.
Mr. Philippe’s documents will be evaluated having regard to these principles.
The invoices submitted cannot make any difference in the arbitrator’s original calculation of Mr. Philippe’s weekly income benefits. They could only serve the purpose of evidence about a change in circumstances on an application to vary the arbitrator’s decision under section 284 of the Insurance Act, R.S.O. 1990, c. I-8, as amended, (the Act). These documents do not meet the criteria for admission on appeal.
Mr. Philippe represented himself in this appeal, and drafted the initiating documents. While he framed the relief he seeks as an appeal, an analysis of his claim shows he is asking for a variation of the order. However, the cellular telephone was not purchased by Mr. Philippe as alternative technology to the pager he had been using in his business. He expressed this purchase as being “for reason of possible return to part-time work in a [sic] near future in my line of work...”. (Notice of Appeal, addendum page 1). There is no changed circumstance in any record or evidence before me, either in Mr. Philippe’s work status or in the business expenses which have ceased as a result of the accident. A variation order is not available based on the submission of this material.
B. Amount of Weekly Income Benefit
Mr. Philippe challenges two related aspects of the arbitrator’s decision - the interpretation of a ceasing expense in the Schedule, and her evaluation of the evidence and assessment of credibility of witnesses and documents. To come to her determination, the arbitrator had regard to 27 exhibits and the testimony she heard. In her reasons, she took care to outline the weight she ascribed to both Mr. and Mrs. Philippe’s testimony, their records, the reports of their accountant, and Royal’s calculations of a ratio of ceasing expenses to earnings. The arbitrator noted at page 8 of her decision:
In submissions on behalf of Mr. Philippe, it was conceded that, if I ruled that a ceasing expense could include a reduction in expenses, Mr. Philippe generally did not take issue with the Insurer’s estimate in this except for two items—the deduction of 100% entertainment expenses and the cost of Mr. Philippe’s pager.
The arbitrator found the financial documentation showed Mr. Philippe claimed no expenses for entertainment and business promotion for the year after the accident. As for the pager, the arbitrator found the lease was cancelled about three weeks after the accident. Dealing with vehicle operation expenses, the arbitrator held they had decreased by approximately 80% after the accident. The calculation did not assume a reduction in maintenance costs, but a significant reduction in gasoline expense.
The duty of the Director, as opposed to that of an arbitrator at the initial hearing, has been canvassed in numerous appeal decisions.1 Shortly put, it is the arbitrator who must hear the witnesses, review the documents presented and consider the submissions of the parties in relation to that evidence. The arbitrator must weigh the evidence, assess its credibility, and then accept or reject it. The arbitrator’s findings are based on the evidence subjected to this scrutiny. The appellate function does not contemplate substitution of a different conclusion where the arbitrator’s findings are supportable once that evidence is reviewed.
My review of the record persuades me the arbitrator’s findings about Mr. Philippe’s post-accident business expenses are substantiated by the evidence before her and I see no reason to interfere with her conclusions.
The arbitrator held that whether an expense is a ceasing expense is a question of fact, based on “an individualized inquiry into the specific circumstances of each case.” She accepted that a decrease in expenses following an accident may be a ceasing expense within the meaning of paragraph 12(7)3 of the Schedule. The arbitrator came to this conclusion on the basis that a complete category of expense need not stop, but only a proportion of the expense might. For example, after an accident, the activities of a self-employed person’s business may be significantly reduced, or as in Mr. Philippe’s case, be suspended, yet some expenses continue to ensure the business remains a going concern pending the person’s recovery. Those expenses, which may include business entertainment, transportation costs or bank charges, do not come to an end completely but continue at a lower level.
The arbitrator noted the activities of Mr. Philippe’s business were temporarily suspended after the accident. He continued to incur business expenses, but they were limited. The arbitrator reasoned as follows:
In such circumstances, it is not unreasonable to take account of the reduced expenses in the calculation of Mr. Philippe's benefits. The income replacement benefits are broadly intended to compensate him, within the limits of the policy, for the income that has been interrupted by the accident (measured by his pre-accident income). To pay him an additional amount in respect of expenses which are not being incurred would, in effect, provide Mr. Philippe with additional compensation for his loss.
I find, therefore, that it is not necessary for a particular expense to stop in its entirety after the accident in order for the expense to be treated as a ceasing expense. If a significant proportion of the expense stops as a result of the accident, that proportion may be regarded as an expense that has ceased under section 12(7)3.
(Decision, p. 11 -12)
In principle, I agree. In some cases, an arbitrary reformulation or narrowing of expense categories will lead to the result that an expense virtually ceases. In this case, the arbitrator observed that Mr. Philippe travelled much less after the accident. Accordingly, he would spend much less for gasoline, although the expenditure did not totally stop. The arbitrator’s legal conclusion on the ratio of ceasing expenses to earnings flows from the factual findings, and there is no reason to overturn it.
Another issue which arose in this context was how to treat income and expenses from Mr. Philippe’s business during a three month period after the accident when he attempted a return to work. Royal deducted 80 percent of the gross amount of the income Mr. Philippe earned during this time, without any allowance for the expenses that may have been incurred to earn this income. The arbitrator found that Royal was not justified in taking this position. She stated at page 15 of the decision:
It [deducting the income earned on a gross basis] represents a serious financial disincentive to an injured person to try to return to some form of work. It therefore clearly offends against the policy of the [Schedule]. It also makes no sense in a context where the benefits based on income are calculated using a “modified net” (i.e. net of ceasing expenses) concept.
However, Mr. Philippe disputes the arbitrator’s use of the same ratio of expenses to income during this period, as she applied to the four weeks preceding the accident. The arbitrator noted that with the exception of gas and meal expenses, little evidence was placed before her on what the expenses during the three month period were. Royal did not take a position on the amount that might be deducted. The arbitrator then stated:
In view of this, I accept Mr. Philippe’s position that the 31.8% ratio of expenses to income should be applied to his post-accident income as a reasonable estimate in the circumstances of this case.
As a result, Royal was ordered to pay Mr. Philippe an additional $998.77 plus interest. I see no reason why, when Mr. Philippe took the position he did at the arbitration and was successful in recouping a further payment from Royal, this is now challenged by him. Only had I determined the arbitrator was wrong in her analysis of Mr. Philippe’s pre-accident income/expenses calculation and applied a different percentage, would the conclusion on the post-accident ratio have to change. No variation to repayment order will be made.
III. EXPENSES
This appeal was based primarily on Mr. Philippe’s view the arbitrator was wrong in coming to her conclusions, although she did so on his own financial evidence. In that respect, the appeal was ill considered. Mr. Philippe continued to insist “ceasing expenses” must be defined as expenses which stop completely after the accident, and that his future plans, including personal choices on equipment replacement, must impact on the determination of what ceasing expenses are. No expenses are awarded.
November 6, 1996
Elisabeth Sachs Director of Arbitrations
Date